Home Buyer's Glossary
1. Agreement of Purchase and Sale: A contract by which one party agrees to sell and another agrees to purchase.
2. Amortization: Period of time required to reduce debt to zero when payments are made regularly.
3. Appraisal: Process by which the mortgage lending value of a property is determined.
4. Bridge Financing: Interim financing to bridge between the closing date on the purchase of the new home and the closing date on the sale of the current home.
5. Broker: An intermediary between the buyer and seller who is licensed to carry out such activities.
6. Building Permit: A certificate that must be obtained from the municipality by the property owner or contractor before a building can be erected or renovated.
7. Closing Date: The date on which the sale of the property becomes final and the new owner takes possession.
8. Commitment: A notice from the mortgage lender to a prospective borrower that the lender will advance mortgage funds of a specified amount under certain conditions.
9. Condition: A condition in a contract that calls for the happening of some event, or performance of some act before the agreement becomes binding.
10. Conditional Offer: An offer to purchase subject to specified conditions. These conditions could be the arranging of a mortgage, or the selling of a present home. Usually a time limit in which the specified conditions must be met is stipulated.
11. Conventional Mortgage: A mortgage loan of up to a maximum of 75% of the lending value of the property for which a lender does not require loan insurance.
12. Debt Service Ratio: The percentage of the borrower's income that will be used for monthly payments.
13. Default: Non-payment of installments due under the terms of the mortgage.
14. Deposit: Payment of money or other valuables in consideration as a pledge for fulfillment of the contract.
15. Discharge: The removal of all mortgages and financial encumbrances on the property.
16. Easement: The right acquired for access to or over another person's land for a specified purpose, such as a driveway or public utilities. This is referred to as "a servitude" in the Province of Quebec.
17. High Ratio Mortgage: Loan that exceeds 75% of the property's lending value, and which is insured thorough a mortgage insurance plan.
18. Holdback: An amount of money withheld by the lender during the progress of construction of a house to ensure that construction is satisfactory at every stage. The amount of holdback is generally equivalent to the estimated cost to complete construction.
19. Mortgage Insurance Premium: A premium which is added to the mortgage and paid by the borrower over the life of the mortgage. The mortgage insurance insures the lender against the loss in case of default on the part of the borrower.
20. Mortgage Life Insurance: A form of reducing term insurance available for all mortgagors. In the event of a death of the owner or one of the owners, the insurance pays the balance owing on the mortgage. The intent is to protect survivors from losing their home.
21. Mortgagee: The entity who lends the money.
22. Mortgagor: The entity who borrows the money.
23. Offer to Purchase: A written contract setting forth the terms under which a buyer agrees to purchase a property. Upon acceptance by the seller, it forms a contract, which will form the basis for the final document to be prepared by a lawyer or notary. It includes the legal and/or municipal description (this may consist of lot numbers as well as street address), purchase price, closing date, mortgage and terms of repayment, and lists specific items included as part of the sale.
24. P & I & T: Principal, interest and taxes due on a mortgage.
25. P & I: Principal and interest due on a mortgage.
26. Penalty: A sum of money paid to a lender for the privilege of prepaying a mortgage in part or in full.
27. Power of Sale: The right of a mortgagee to force the sale of the property without judicial proceedings should default occur.
28. Prepayment Option: The right to prepay a specified amount of the principal balance. Penalty interest may be incurred on prepayment options.
29. Prepayment: Full or partial prepayment of all or part of the principal, separate from the regular payments called for under a mortgage agreement.
30. Principal: The amount owing to the lender at any time.
31. Rate (Interest): The return the lender receives for loaning you the money for the mortgage.
32. Real Estate: Includes real property, leasehold and business whether with or without premises, fixtures, stock in trade, good of chattels in connection with the operation of the business.
33. Roll-Over Mortgage: A mortgage loan where the interest rate is established for a specific term. At the end of the term, the mortgage is said to "roll-over" and the borrower and the lender may agree to extend the loan. If satisfactory terms cannot be agreed upon, the lender is entitled to be repaid in full. In this case, the borrower may seek alternative financing.
34. Sale Representative: A licensed employee of a Real Estate Broker authorized to trade in Real Estate.
35. Survey: The accurate mathematical measurement of land and building thereon.
36. Term: The length of time which you pay a specific interest rate on your mortgage loan. At the end of the term you may repay the balance of the loan or re-negotiate at current rates and conditions.
37. Title: Evidence of ownership.
38. Vendor Take Back: Where the seller of a property provides some or all of the mortgage financing in order to sell the property.
39. Vendor: Seller of real property.
40. Zoning Laws: Municipal laws restricting the use of land for specific purposes.